OEMs outsourcing high-tech electronic components, unspecified electronics from China and Malaysia, and conflict minerals such as tin, tantalum, gold and cobalt from the Democratic Republic of the Congo are at risk or having their inventory physically seized by U.S. customs if those components have been produced by child or forced labor.
In March, the Trade Facilitation and Trade Enforcement Act 2015 became law. Now, customs officials have the power to block imports of materials, components, and products that may have used forced (slave) or child labor. Currently, the Department of Labor's (DoL) existing watch list includes 136 goods from 74 countries, and 353 line items, which are believed to have been produced by child labor or forced labor in violation of international standards.
Items that could fall afoul of the new legislation are numerous and many are bought and sold in the high tech sector. Trafficking Victims Protection Reauthorization Act (TVPRA) of 2005, for example, lists the number of goods produced globally by:
- Child labor: 126 goods plus pornography
- Forced labor: 55 goods plus pornography
In the manufacturing wector, the list includes 53 goods are produced by child and/or forced labor. Malaysia was added to the TVPRA List in 2014 for its production of electronics by forced labor.
an item may be removed from the TVPRA List if a problem with child or forced labor is significantly reduced, or eliminated from the production of the particular good in the country in question. Bureau Of International Labor Affairs (ILAB) researches potential removals on an ongoing basis.
The origin of the list states, “none of the products we consume on a daily basis should be made by an adult who is forced to produce them, or a child under conditions that violate international law.” Despite this being the 21st century, reality indicates that there is still a long way to go toward the eradication of all the goods from the list.
Strong international labor standards, improved data collection, and reporting play a significant role to combat forced and child labor more effectively. However, it remains unclear how customs officials can determine which undesirable goods are being shipped. In reality, there are too many factors to consider.
What can OEMs do to map and mitigate child and forced labor
In an interview, Geraint John, supply chain risk expert and vice president of Research at SCM World, told EBN that the importance of the new act is its threshold potential impact. “It's not that it's just a regulatory compliance issue with a potential fine if you don't comply,” said John.”It's not just a potential damage to your brand as a branded manufacturer but also the potential physical disruption in the sense that your products, or materials, or components could actually be saved by U.S. customs.”
“From the supply chain risk perspective that's not a place where you want to be caught,” said John. Its impact would be enormous affecting all brand, legal, factory, and physical delay back to your customers.
John told EBN that research conducted last year by SCM World Research found that 40% of high-tech companies found that legal regulatory risk was a major concern during the course of 2016. “Hi-tech companies are extremely concerned about regulatory risk and the need to comply with that,” he said.
Source: SCM World: Future of Supply Chain survey 2016
“Companies need to review the suppliers' standards that they publish and expect their suppliers to adhere to, making it much more clear that child labor is not acceptable and they won't do business with the suppliers that cannot show that they complying,” John said. Also, suppliers need to make sure their suppliers are not using any sort of child labor. This has to through the entire length of the supply chain to be effective.
Audits are necessary but not sufficient. “They are typically focused on tier-1 supplier level,” said John. “The problem is that if you are not directly buying things like cobalt or gold audits just tier-1 level are not going to show you if your products are potentially at risk.” It is necessary to have good visibility of risk at tier-2 and tier-3 supplier levels, or beyond as well.
John says there is a lot of education and training that needs to be done within the companies, not just in the procurement and sourcing functions but also in every aspect of the operations. “People need to watch out for the signs of things going wrong, or risky sources or materials, also component makers,” he said. “They need to understand what the legislation covers; they need to look out at how they go about reporting suspicious or potential violations.”
Slavery in the supply chain is a difficult topic. However, with the implementation of the new Act and the electronics supply chain industry collaborating and working together, it might be possible to, one day, eradicate child and forced labor altogether. Let us know about the efforts your organization has made in this area in the comments section below.